James Wickham: The focus in this post is the debate about the benefits of diversity. [Part 1 of these four posts is here]
Problem #8 Not all kinds of diversity create innovation
In his paper, FitzGerald repeats the mantra that immigration creates diversity and so stimulates innovation. He explicitly states that one cause of London’s economic dynamism is its cultural and ethnic diversity, the result of recent immigration. Since ‘innovation’ is seen as fundamental to economic growth, here we have a new and separate economic rationale for immigration.
What is astonishing about this argument is that it is taken as self-evident by commentators, yet the actual empirical evidence is very limited. Since economic growth generates in-migration, there is an obvious possibility that diversity may be a consequence of innovation, not its cause. One detailed analysis of the impact of immigration on the London economy could find no evidence for the claim that the resulting diversity has increased innovation (Gordon et al 2007: 59); a more recent study using firm level data reports a small but significant ‘diversity bonus’ across all types of firms in London (Nathan and Lee 2014).
Certainly, the contribution of specific immigrant groups to innovation is well known historically, from the Huguenot refugees of the 17th century (in Ireland, England and Prussia) to the East African Asians of the 1970s in Britain; the contemporary contribution of Chinese and especially Indian migrants to innovation in Silicon Valley is also well documented (e.g. Saxanian 2006).
In the UK in particular the contribution of so-called ethnic entrepreneurship has been discussed for some time. We can also recall cities of the past such as Alexandria, Salonica or Odessa, known for economic dynamism and for their polyglot and ethnically diverse populations – and now of course homogenised by nationalism and/or religious fundamentalism .
However, neither the specific contributions of specific groups nor the peculiar features of entrepôt cities prove that diversity in itself heightens innovation. The next section shows that there are equally plausible arguments that diversity lowers social capital, and given that trust is often seen as crucial for innovation, it could even be argued that immigration is bad for innovation .
3. Quite apart from some rather more fundamental sociological problems
The economic ‘benefits of diversity’ thesis is interwoven with the more general if much vaguer belief that diversity is anyway a Good Thing. Nobody now wants to be against ‘diversity’. Recently however this comfortable assumption has been challenged.
Since World War II, European nation states became welfare states. Whereas in the past (male) citizens were defined by their obligation to fight for the state (‘Aux armes citoyens’ in the Marseillaise, ‘The Soldier’s Song’ for Ireland) now they are defined by their involvement in the systems of mutual support (education, health, social welfare…).
And the welfare state actually makes greater demands of its citizens, because it asks them to pay for each other, to look after each other, and to contribute towards the next generation. Although the welfare state involves some ‘vertical’ redistribution (from the rich to the poor), it also involves massive ‘horizontal’ redistribution, from those at work to those either too young or too old to work. The welfare state therefore makes enormous demands on all its members. It is plausible that the more diverse – the more not like me fellow citizens are – then the greater this unwillingness.
Furthermore, where integration occurs through the recognition of difference (‘multi-culturalism’ ) rather than through assimilation, this will further weaken this readiness to fund one’s fellow citizens now and in the future.
Such arguments are supported by historical research and by work in political economy. Thus a landmark study of American distinctiveness argues that in the USA, where ethnic or ‘racial’ divisions are strong and politicised, welfare is seen as transferring resources to ‘them’ and has little political support; conversely, the most advanced welfare states in Europe, those of Scandinavia, were built when these societies were remarkably homogenous in terms of religion and ethnicity (Alessina and Glaser 2004).
This general argument was reinforced in a much cited paper by Robert Putnam (2007). Putnam argued that diversity (measured in terms of ethnic origin) leads to what he termed ‘hunkering down’: in diverse areas social trust is lower, not just between the different groups but also within them.
Putnam was careful to stress that new identities can be created from diversity, so that diversity can diminish and trust rise – but this of course is the opposite of the Diversity is Good For You argument. It is after all worth noting that the integration of America’s European ethnic minorities occurred from the 1920s through to the 1960s – the period when there was an effective ban on mass immigration. There is also strong evidence that the combination of multicultural policy and easy access to generous welfare provision works to marginalise ethnic minorities, as measured by low labour force participation and over-representation within the prison population (Koopmans 2008).
Such views are not accepted by all researchers. Others have argued that a strong social democratic tradition can insulate European societies against these fissiparous tendencies (Tayor Gooby 2005).
All of these issues are the subject of extensive debate, but there is now enough historical and social science evidence to suggest that at very minimum diversity, social cohesion and social solidarity are uneasy bedfellows. Probably progressives face a stark choice:
This is America versus Sweden. You can have a Swedish welfare state if you are a homogenous society with intensely shared values…In the US you have a very diverse, individualistic society where people feel fewer obligations to fellow citizens. Progressives want diversity but they thereby undermine part of the moral consensus on which a large welfare state rests (David Willetts in 1998 quoted in Goodhart 2013).
On this basis it’s hardly surprising that the most explicit advocates of continued extensive mass immigration are on the one hand, the lobbyists for multi-cultural policies and on the other hand, advocates of the deregulated free market .
The ethnic purification of Salonika (contemporary Thessaloniki) is the theme of the masterful account by Mazowerer (2005). Arab nationalism and now Islamism have largely homogenised Alexandria; the holocaust and Stalin’s ethnic sorting after World War II achieved similar results for Odessa.
 Consider here the experience of the ‘third Italy’ based on the innovative small businesses of Emilia-Romagna and Tuscany. Immigration has changed the workforce and undermined one basis for innovation (Andall 2007).
 ‘Multiculturalism’ can mean many different things. In everyday parlance in the English-speaking world it now usually just means tolerance. However, multiculturalism as policy means far more than this. It means the acceptance of different communities and their institutions as part of public policy; it will be supportive for example of different education for different minorities and recognition of other languages than the national language. For key early discussion of the problems of multi-culturalism as policy see Joppke (1999).
 As exemplified by Philip Legrain’s polemic Immigrants: Your country needs them (2007).
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